The Pound approached multi-month highs against the Australian Dollar on Monday following an unexpectedly upbeat UK data release.
Gains were muted however as the Australian Dollar also benefited from positive news from Reserve Bank of Australia (RBA) officials.
Last week, the Pound to Australian Dollar exchange rate rose steadily from an opening rate of 1.69 on Monday to 1.72.
‘Strong’ UK Manufacturing Stats Trigger GBP AUD Rally
The Pound got off to a poor start this week, sliding from 1.72 to 1.71 against the Australian Dollar due to fears about the Brexit process.
Since then, Sterling has halted its decline and made a steady advance against the Australian Dollar.
The UK manufacturing PMI rose from 54.2 points to 57.3. This went against forecasts for a slight decline. Commenting on the result was IHS Markit Senior Economist Rob Dobson;
‘The upturn in manufacturing represents some welcome good news after the GDP [slowdown] seen in the first quarter. The big question is whether this growth can be maintained, especially given the backdrop of ongoing market volatility and political headwinds [like] elections at home and abroad’.
RBA’s Job Market Remarks Raise Trader Confidence
The Australian Dollar has dropped slightly against the Pound today despite positive Australian news.
Monday saw Australian manufacturing rise in April from 57.5 to 59.2 while on Tuesday the Reserve Bank of Australia (RBA) left interest rates at 1.5%. In a statement published with the decision officials asserted that the unemployment rate was likely to ‘decline gradually over time’ – a more positive take on the domestic labour market than seen previously.
GBP/AUD Exchange Rate Forecast
For the rest of this week, Pound/Australian Dollar exchange rate movement may occur as a result of UK construction and services PMIs, due on Wednesday and Thursday.
Construction activity is forecast to slow, but given how little construction contributes to overall growth the report may have little impact on demand for the Pound.
As the services sector accounts for over 70% of growth, the result of this gauge is likely to be far more influential.
Forecasts are for a drop from 55 to 54.5, which may panic traders and cause a Sterling decline.
Australia’s services figure is also out on Wednesday. If the April reading falls below the 50 mark separating growth from contraction, AUD losses are a possibility.
Other key Australian releases will be Thursday’s March trade balance result and a speech from RBA Governor Philip Lowe. A narrowing in the trade surplus has been predicted, while Lowe could also weaken AUD if he voices concerns about the domestic housing market.